Being single does not mean you cannot buy a house with someone else, and being married doesn’t obligate you to buy a house with your spouse. The Uniform Residential Loan Application, URLA, provides space for up to two applicants. The mortgage company calls the first applicant the “borrower” and calls the second applicant the “co-borrower.” If the lender uses the terms primary or secondary borrowers, they usually refer to the main source of income or credit.
Joint Mortgage Application Basics
Any two people may purchase a home together. More than two may purchase and mortgage a house together, which sometimes occurs. Multiple families sometimes jointly purchase and finance a vacation home. No single borrower is the “primary” or “secondary” borrower. If you purchase a house with someone who you do not already have a permanent financial relationship with, like a spouse or business partner, decide and put into writing the specifics of who makes how much of the payment and receives what percentage of the proceeds when it sells.
Primary Income Earner
When two people, such as spouses, purchase a home, the lender may refer to the higher wage earner as the primary borrower. This antiquated term refers to a time when the husband worked and the wife stayed home. This may have been normal in 1950, but in the 21st Century, it’s the exception. Usually both spouses use income to qualify for the home, and the major difference between the incomes amounts has more to do with the type of job than the sex of the borrower.
Qualifying Credit Score
Mortgage lenders review all three credit bureaus and their credit scores for both borrowers. Many loan programs require specific minimum credit scores for approval. Each borrower provides three credit scores, which the lender uses the middle credit score. If the borrower’s scores are 600, 670 and 620 and the co-borrower’s scores are 705, 659 and 619, the borrower’s qualifying credit score is 620 and the co-borrower’s qualifying credit score is 659. The lower of the two middle credit scores is used to qualify for the mortgage, in this case the borrower’s 620 score. If the loan program required a 660 score, the lender would not approve the loan with the borrower on the loan, but may if the co-borrower could qualify alone.
Sometimes a parent or guardian will co-sign for a mortgage with their child. The child will live in the home but the parent will not. The parent is a “non-occupant co-borrower.” Different lenders treat this situation differently. Often very little benefit occurs from this arrangement because the borrower usually must qualify for the home without the co-borrowers income. Each lender treats this situation differently, so contact your lender for specific details on how they handle it.
David Rouse, currently residing in Raleigh, N.C., has been writing and teaching home owners about the mortgage industry since 1997. Rouse has written training manuals for mortgage professionals and conducted informational first-time home-buyer seminars, providing make-sense answers for a long and confusing process. He studied at Western Kentucky University.